ANNEX 4: PRESENTATIONS FROM WORKING SESSION 1 … · (CV) FI PE MF . INTERNATIONAL ANTI-CORRUPTION CONFERENCE, ASTANA, KAZAKHSTAN, 16-18 SEPTEMBER 2009 106 CV has contacted the RADET

INTERNATIONAL ANTI-CORRUPTION CONFERENCE, ASTANA, KAZAKHSTAN, 16-18 SEPTEMBER 2009

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ANNEX 4: PRESENTATIONS FROM WORKING SESSION 1 –

PROSECUTION OF FOREIGN BRIBERY

Mr. Patrick Moulette, Head of Anti-Corruption Division, OECD

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

It is a crime in each of the 38 State Parties…

… for companies to give, offer or promise bribes….

…to foreign public officials in any country…

…to gain advantages in international business transactions.


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“Prosecuting foreign bribery in the United States”

Ms. Nicola Mrazek, Trial Attorney, Department of Justice, United States

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Corruption Prosecutor’s Toolbox International Conference: Creating Conditions for Sustainable

Economic and Social Development in Eastern Europe and

Central Asia: Fighting Corruption and Promoting Good

Governance, September 16-18, 2009, Astana, Kazakhstan

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The United States’ Example

The U.S. in the recent years has brought record numbers of foreign corruption prosecutions.

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The United States’ Example

Accomplishments: Increased Deterrence for Companies and

Individuals

Raised the Standard for Corporate

Compliance Programs

Secured Fines, Forfeiture, and Seizures

Created Incentives for Better Due Diligence

Developed Successful Partnerships with

Foreign Law Enforcement

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Corruption Prosecutor’s Toolbox

Corruption Cases Are Difficult

Know Your Tools

Use All of Them

Build on Your Successes


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Case Identification Tools

Look Local

Local press stories

Other criminal cases

Whistleblowers

Disgruntled competitors

Current cooperators

Local civil court cases

Think Broadly

Corruption cases come in all sizes

Corruption cases involve many industries

Natural Resources Oil

Natural Gas

Direct Government Functions National Security

Infrastructure

Foreign Aid Projects

State-Run Companies Telecommunications

Power

Governmental Duties Customs

Taxes

Permits

State-Run Health Care Medical Devices

Pharmaceuticals

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Some Sectors Prone To Foreign Bribery

All corruption

prosecutions are

valuable.

Smaller cases may

give you the leverage

to pursue larger ones.


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Case Identification Tools

Look Global

Global Press on Cases Abroad

(Both Criminal and Civil)

Newspaper stories, press releases, blogs,

Google alerts

Mutual Legal Assistance Requests

Referrals From Law Enforcement

Partners

Natural Resources Oil

United States v. Bourke, Azerbaijan

United States v. Rothrock, Russia

Direct Government Functions Foreign Aid Projects

United States v. Pitchford, United Kingdom, Turkmenistan, and Uzbekistan

State-Run Companies Power

United States v. Morlok, Romania and 35 other countries

Governmental Duties Permits

SEC v. Delta & Pine Land Co., Turkey

State-Run Health Care Medical Devices

Non-Prosecution Agreement with Micrus Corp., Turkey and other countries

Pharmaceuticals SEC v. Schering-Plough, Poland

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Examples of U.S. Prosecutions in the Region


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Form Relationships

Within Your Country

Within Your Region

With Law Enforcement Abroad

Ask for Advice

Send Requests for Evidence

Both Formal and Informal

Conduct Parallel Investigations When Possible

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Evidence Gathering Tools

Ecuador (x 2)

France (x 2)

Germany (x 2)

India

Haiti (x2)

Hong Kong

Malaysia

Mexico (x 2)

Netherlands

Spain

Switzerland

Thailand

Turks & Caicos (x2)

United Kingdom 10

Nicola’s Legal Assistance Requests You Can’t Prosecute International Crime Without Help


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Example: United States v. Self and Smith;

The Queen v. Hale

Interviews, Accounting Records, Emails, Bank

Records, Tax Records, Travel Records

Interviews, Testimony, Contract Files, Bank

Records, Evidence from Search Warrants

Guilty plea

of corrupt

Ministry of

Defense

Official

Guilty

pleas of

President

and Vice

President

of U.S.

Company

Secure and Review Documents

Emails Are Invaluable

Fake Invoices and Consultancy

Agreements Can Be Exposed

Accounting Documents Can Show

Profits to Company

Bids, Contract Documents, and

Correspondence Can Show

Benefits

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Two defendants pleaded guilty to conspiracy to commit corruption and money laundering in Haiti.

They paid bribes, through fake consultants, to officials at Haiti’s national telecommunications company.

The corruption was discovered in the course of a narcotics investigation. Individuals involved in the drug conspiracy knew of the bribery and told the investigators who to speak to and what accounts to review.

Haiti has never brought a corruption prosecution, and the United States does not have a mutual legal assistance treaty with Haiti.

However, Haiti has supplied valuable evidence to the United States and has fully supported the U.S. prosecution.

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Example: United States v. Diaz and Perez

Use Cooperators When Possible

Plea Bargaining Is A Major Tool

Even If Your Country Doesn’t

Have Formal Plea Bargaining,

You May Still Be Able To Gain

Useful Information

You May Be Able To Use

Cooperators Created In Other

Countries

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Create Financial Leads

Volunteer and do a thorough job of responding to other countries’ requests for evidence

Form relationships with banks

Follow the Money

Get bank records

Enter and analyze all records Fronts and backs of checks

Origins and destinations of wires

Account opening information, including beneficiaries

Understand basic accounting

Make Egmont and Legal Assistance Requests

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Corporate Disclosures

Voluntary Disclosures U.S. Companies and Companies Listed on U.S.

Stock Market

One Third of Our Cases Are Generated This Way

We Can Ask Companies to Cooperate Not Just With Us But With Foreign Investigators

If You Have Evidence of a Multi-National Company Bribing Officials in Your Country, Call Us and We Will Help You, Whenever Possible, Secure Evidence

Involuntary Disclosures If Companies Do Not Voluntarily Cooperate, U.S.

Criminal Authorities Often Have the Ability to Compel Their Cooperation

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Control Components, Inc. (CCI), based in California, designs and makes valves for oil, gas, nuclear, coal, and power plant industries.

CCI voluntary disclosed bribery to the U.S. Department of Justice.

Richard Morlok, CCI’s former finance director, pleaded guilty to making corrupt payments to government officials at many state-owned entities in more than 35 countries.

Mario Covino, CCI’s former director of worldwide factory sales, also pleaded guilty.

CCI pleaded guilty, agreed to accept a corporate monitor (an independent person who reviews and evaluates a company’s compliance program) and implement an anti-bribery compliance program, and paid a fine of $18.2 million.

Six other executives await trial.

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Example: United States v. Morlok

Corporate Disclosures, continued

U.S. Securities and Exchange Commission Investigates Companies Listed on U.S. Stock

Market for Corruption

Can Impose Civil Sanctions

Special Resolutions of Corporate Cases Deferred prosecution agreements

Contracts to drop charges against companies if they fulfill reform conditions and pay a fine.

Non-prosecution agreements

Contracts not to bring charges against companies if they fulfill reform conditions and pay a fine.

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Micrus Corporation develops and sells medical devices known as embolic coils for treatment of neurovascular diseases.

Micrus voluntarily disclosed that it had been making payments to doctors employed at publically owned and operated hospitals in Turkey, France, Spain, and Germany.

Approximately $105,000 of payments were made. These were disguised in the accounting records of Micrus as stock options, honorariums, and commissions.

Micrus paid a $450,000 fine, adopted an internal compliance program, and retained an independent compliance expert for three years to prevent violations.

Non-prosecution agreement: If Micrus complied with these terms, the U.S. Department of Justice would not prosecute the corporation.

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Example: Non-Prosecution Agreement with

Micrus Corporation

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Corruption Prosecutor’s Toolbox


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Nicola Mrazek

Trial Attorney

Fraud Section

Criminal Division

U.S. Department of Justice

Tel: (202) 514-8122

[email protected]

Contact Me


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“The Radet case”

Mr. Horatiu Ovidiu Baiais, Prosecutor, National Anti-Corruption Directorate, Romania

R O M A N I A

Prosecutor’s Office attached

to the High Court of

Cassation and Justice

National Anti-corruption Directorate

Criminal Case “RADET”

involving Romanian and

German judicial authorities

Ref. No.105/P/2002

Bribery of

foreign officials


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The crime was committed

between 1998 – 2002 in

Romania

The criminal inquiry, the international co-

operation and the trial were conducted

between 2002 - 2009

The story has started at an

exhibition in Germany in 1998

The suspect FM, an employee of German PRS Company, has presented his new invention related

to fixing pipes and met with this occasion the German businessman “suspect FG” original from

Romania


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The suspect FG flies to Romania to find other

businessmen interested in this issue

Hannover

They looked for persons with influence over the

leadership of RADET company

They found as intermediary person the suspect CV who was a colonel in the

Romanian secret service and had influence over high officials of RADET company

Suspect

(CV)

MF PE FI


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CV has contacted the RADET directors

They have discussed about the proposal of the German part

UL

DG

CM

CV

One of the directors of RADET has refused the

business with the German partners

The suspect “CM” objected initially

against the project with the Germans


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The suspect CM was “stimulated”

in order to cooperate

Because he was very passionate bridge player, FM sponsored him to travel with his family to Amman, Jordan to participate at a

Bridge Competition.

The suspect CM accepted the terms of the deal with FM when he came back from this vacation.


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The German partners have paid the

first bribe to RADET officials

10.000 DM

Different electrical devices

RADET signed the contract with PRS

The German company PRS has won the right to sell products to RADET

in value of about 5 million DM.

Because of this bribe,

the contract with

RADET was signed for

even much money as

prior discussed.


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More money as bribe

The representatives of PRS company paid

more money, about 500.000 DM, as bribe

from the company accounts using bank

transfers to the RADET officials after they

have signed the contract.

THE CRIMINAL INVESTIGATION OF THE NATIONAL ANTI-

CORRUPTION DIRECTORATE

The first 3 Romanian suspects CV,FM and DG have been arrested on the 5th of December 2002;

Two more Romanian suspects CM and UL have been arrested on the 9th of December 2002;

The criminal proceedings were lodged on the 12th of December 2002 also against the German suspects GK and RD, the suspects who acted on behalf of FM and FG;

Two more Romanian suspects PE and UL has been arrested on the 27th of February 2003.


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International Co-operation

DNA has formulated on the

3rd of February 2003 a Mutual

Legal Assistance request to

the competent authorities

from Hannover in order to

obtain evidences related to

the above mentioned money

payments and facts.

House searches in Germany

The Court of Hannover has ordered on the

26th of June 2003 search houses at the

premises of PRS Company and at the

residences of the suspects GK and RD.


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International Co-operation DNA has received on the 31st of June 2003 from Hannover the

preliminary report containing important evidences for the Romanian investigation : documents related to money

transfers, to the bookkeeping of PRS Company, invoices, statements etc.

International Co-operation The Prosecutor’s Office Hannover requested DNA on

the 17th of October 2003 to accept to hand over the criminal proceeding against the German suspects

involved in the case.

The indictment of DNA from the 12th of January 2004 has ordered the transfer of the criminal proceeding against the German suspects to the Prosecutor’s Office Hannover.

All documents were handed over on the 24th of February 2004 to the Prosecutor’s Office Hannover, that took over officially the criminal proceeding on the 12th of July 2004.


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Sending the suspects to the court

The DNA indictment from 12th of

January 2004 has also sent to trial

the seven Romanian suspects.


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International Co-operation The Prosecutor’s Office Hannover has formulated a Mutual

Legal Assistance request on the 5th of April 2005 in order to obtain statements from all Romanian accused persons.

This request has been executed by the Romanian authorities.

Hannover

Legal consequences in Romania

The Appeal Court Bucharest has convicted in June 2009 the Romanian officials for “ taking bribe ” and the intermediary accused persons for “ trafficking in influence and complicity at giving bribe” with punishments from 4 up to 6

years imprisonment


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Legal consequences in Germany

German suspects FG, RD and MF were sent to trial in Hannover on the 18th of June 2008.

The Court of Hildesheim has condemned on the 26th of June 2009 the accused RD and GK to pay 5.000 € penal fine each, the accused FM

600 € and the PRS Company 200.000 €.


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“Asset recovery – from concept to practical use to prosecute bribery”

Mr. Pedro Pereira, Basel Institute on Governance, International Centre for Asset

Recovery, Switzerland

Asset Recovery Process

1. Identify

2. Trace

3. Seize

4. Confiscate

5. Repatriate

Nicolau dos Santos Neto/TRT-SP

• President of the Labour Court for the State of

São Paulo

– Favourably awarded public bid to

contractors responsible for building the

new Labour Courts Building

– Federal Treasury released a total of USD

125 million, of which USD 33 million were

invested in the construction


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• Received monthly pay-offs from the contractor, which were deposited via modified hawala system in 2 Swiss bank accounts

• The Judge created a trust in the Bahamas worth USD 1, and opened a shell corporation in the Cayman Islands

– Shell corporation (worth USD 1) was created in the name of the trust

• Shell corporation acquired a penthouse in Miami (USD 1.6 million)


• Shell corporation was domesticated in

the United States and a second shell

corporation was created to interact with

the first shell corporation

– Renovation of the penthouse (USD

600.000)

– Acquisition of several luxury vehicles

– Acquisition of jewelry


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• The scheme was tipped off by contractor in charge of the renovation, as he was not paid fully for the services he provided

• Media coverage

• Findings: – The financial institution actively helped the

Judge launder his assets

– Had the judge saved his entire salary for a lifetime, he would not have been able to buy the property in Miami


• Money seized in Switzerland

– Awaiting final judgement in Brazil for

confiscation and repatriation

• Property in the US was repatriated

through civil litigation

– No MLA treaty between the countries at

the time

– Hiring of private lawyers within the US


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Waldomiro Diniz

• Personal Aide to a President

– Recorded on tape accepting bribes to

favour public contract on the state-run

lottery system to an international company

• Business in Brazil accounted for one-

third of the annual revenue of the

company.

Waldomiro Diniz

• A congressional inquiry was put in place to investigate the facts

– 2 other congressional inquiries were later put in place to investigate facts reminiscent to the corruption scheme

• US opened a FCPA investigation on the bribing company and Brazil opened several investigations pertaining to the public officials


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Waldomiro Diniz

• A joint investigation strategy was put in

place

– Evidence gathered in one country and

relevant to the other were transferred

through MLA

• The final prosecution in Brazil is

pending.